Gold sails past USD 3,900/oz for first time on safe-haven bids

Gold surged past the USD 3,900-an-ounce level for the first time on Monday, driven by safe-haven demand following a fall in the yen and a US government shutdown, while growing expectations of additional Federal Reserve rate cuts also lent support.

Spot gold was up 0.9% at USD 3,922.28 per ounce by 0208 GMT, after hitting an all-time high of USD 3,924.39 earlier in the session. US gold futures for December delivery gained 1% to USD 3,947.30.

“Yen weakness on the back of the Japanese LDP elections has left investors with one less safe-haven asset to go to, and gold was able to capitalize,” said KCM Trade Chief Market Analyst Tim Waterer.

“The enduring US government shutdown means that a cloud of uncertainty still hangs over the US economy and the potential size of any GDP impact.”

Gold is a go-to asset for investors under these circumstances, particularly with the Fed expected to cut rates further this month, Waterer said.

The yen tumbled against the US dollar by the most in five months after fiscal dove Sanae Takaichi was elected to lead the ruling party and become the next prime minister.

The Trump administration will start mass layoffs of federal workers if US President Donald Trump decides negotiations with congressional Democrats to end a partial government shutdown are “absolutely going nowhere,” a senior White House official said on Sunday.

Fed Governor Stephen Miran pressed for an aggressive rate cut trajectory again on Friday, citing the impact of Trump administration’s economic policies.

Gold has climbed 49% so far this year after a 27% rise in 2024, helped by strong central bank buying, increased demand for gold-backed exchange-traded funds, a weaker dollar and growing interest from retail investors seeking a hedge amid rising trade and geopolitical tensions.

The rally found fresh support last month after the Fed cut rates by a quarter of a percentage point and indicated it would steadily lower borrowing costs for the rest of the year.

According to the CME FedWatch tool, investors are pricing in additional 25-basis-point cuts in both October and December, with probabilities of 95% and 83%, respectively.

Non-yielding gold thrives in a low interest rate environment and during economic uncertainties.

Spot gold broke the USD 3,000-per-ounce level for the first time in March and USD 3,700 in mid-September. Many brokerages have turned bullish on the rally.

Elsewhere, spot silver climbed 0.8% to USD 48.33 per ounce, platinum rose 1.1% to USD 1,621.90, and palladium gained 0.8% to USD 1,270.25.

(Reporting by Brijesh Patel and Anushree Mukherjee in Bengaluru; Editing by Sumana Nandy and Subhranshu Sahu)